BB worries over unusual LC payments

Al Amin :
The country spent more than four times for importing capital machineries in last fiscal year (2021-22) compared to the previous fiscal year, although the opening letter of credits (LCs) has been going down significantly since August this year after imposition of restriction on imports.
Differed payment of old LCs and increase in prices of machineries were blamed for the higher growth, but economists and bankers said that only the two reasons are not responsible for this. Rather, a huge amount of money has been laundered through over-invoicing, they suspected.
 According to Bangladesh Bank data, Bangladesh spent around $13.33 billion for importing capital machineries during last fiscal year breaking all previous records.
The country spent $3.03 billion in previous fiscal year. Earlier, the highest expenditure for importing capital machineries was recorded in FY 2018-19. Even then, capital imports were limited to below $5.5 billion.
Manufacturers, however, said Bangladesh witnessed high growth in the import of capital machineries in the last one-and-a-half years as many entrepreneurs increased their production capacity due to the increased growth in garment exports.
Mohammad Ali Khokon, President of the Bangladesh Textile Mills Association (BTMA), told The New Nation “Only textile sector imported machineries worth around $3 billion. Machineries have also been imported in economic zone projects during that time.”
“Most of the imported machineries in the textile sector come from European countries. In this case, there is no chance to show higher price,” he said.
“Besides, the figures of the refinery industry and LPG projects were also included in the calculation of capital machineries imports. The government has also imported for various projects. Following this, the size of the import expenditure looks very large,” he added.
Dr Ahsan H Mansur, Executive Director of Policy Research Institute (PRI), said, “It is necessary to look into why the cost of import of capital machineries increased so high. The statistic certainly raises concerns. In this case, it should be investigated whether there is money laundering.”
According to Bangladesh Bank, there has been over invoicing of at least 20 to a maximum of 200 per cent in the current calendar year (2022).
Speaking at a discussion recently, BB Governor Abdur Rauf Talukder said, “On an average, LCs was opened worth around $8.4 billion in first six months (January to June) of the current calendar year.”
“The central bank started checking the data of many LCs of last year and current year to see whether there was over invoicing. It has also been able to identify the fact that the prices of imported products have been increased by 20 to 200 per cent since last July,” he added.
Dr Mustafizur Rahman, Distinguished Fellow at CPD, said, “We are repeatedly saying that there is a big chance of over-invoicing in importing capital machineries as there is zero-duty facility. Around 80 per cent of laundered money is being occurred through over and under invoicing.”